• Some expect reduction of 50 basic points (BPS) in the policy rate.
  
• Analysts warn of potential recession, inflation due to customs.
• Tresmark voting shows that 68% of traders do not expect any change in policy.
  

Karachi: In light of economic and geopolitical uncertainty combined with inflation problems is expected to keep its most important interest rates unchanged at 12% with analysts who neglect the chances of a shift until the budget for the next financial year (FY26) was announced and inflation risks became clearer, became clearer, clearer The news Reported on Sunday.

Most analysts and studies from major brokerage companies have predicted that SBP would hold the policy rate on Monday, while some predict a reduction of 50 basic points (BPS). However, few estimate that the rates would be cut from 100 bps.

If the majority is correct, it would mark that the central bank’s second consecutive grip since it began a monetary easing cycle in June 2024. Since then, the rates have been reduced by 1,000 bps. SBP kept the rates unchanged at 12% during the last monetary policy meeting in March with reference to the risk of price increases due to higher US tariffs.

SBP’s Monetary Policy Committee (MPC) has room to lower the rates further as inflation eased to 0.3% in April, down from 0.7% in the previous month. Concerns of Pakistan’s economy derived from global trade disorders, geopolitical tensions and inflation pressure after the upcoming budget can force SBP to continue gently at this time.

Analysts have warned that US President Donald Trump’s customs duties could cause more harm than expected. Potential recessions and inflation clusters could have a negative impact on transfers, an important support for Pakistan’s external current account.

Saad Hanif, head of research at Ismail Iqbal Securities, said MPC highlighted continuous risks from elevated core inflation and potential increases in food and energy prices during its last meeting. The IMF has also emphasized the need for sustained monetary discipline and pointed out that the full effects of previous efforts have not yet been felt.

“With the federal budget approaching in June, politicians are likely to monitor its potential inflation consequences. Based on this, we expect MPC to maintain the policy rate in the upcoming meeting,” Hanif said.

SBP is likely to adopt a waiting-and-see approach ahead of the IMF’s Bailout Loan Program program for $ 7 billion on May 9, where it will decide whether to release the Traction of $ 1 billion to Pakistan. In addition, the global lender will discuss a new $ 1.3 billion climate products.

A Tresmark vote shows that 68% of traders expect any change in the upcoming monetary policy.

“Markets are rattled by trade risks, capital outflows and a central bank that is rightly careful. Over $ 225 million is quietly abandoned from bonds and shares (April 2025). A cut could extend the exit door,” it said.

“That said, the growth history is buried. Export-to-BDP falls on falling. FDI is slack. If there’s ever been a case for monetary stimulus, it’s now.

Maybe the central bank may need to prioritize growth in relation to caution, ”it added.

Sana Tawfiq, head of research at ARIF HABIB LIMITED, expects a 50bps cut in interest rates, bringing them down to 11.5%. This expectation is driven by a tendency for disinflation and a historically high real rate of 11.3%.

“We believe that a measured and cautious interest rate cut would help support financial recovery without undermining macroeconomic stability, especially given the improvement, yet vulnerable, external account position,” Tawfiq said.

“While Pakistan issued a $ 1.86 billion profit surplus, a recent UPTICK in imports and geopolitical uncertainties in the region can pose the risk of inflation and exchange rate. These developments can encourage SBP to calibrate the top of ease carefully, while maintaining a vigilance of evolving the Evolution External Dyamics,” ” she added.